Fiscal Rules Reeves's Radical Changes Could Go Further - New Zealand Shows How

Rachel Reeves will this week change the way the UK government's debt rules are calculated to unlock billions of pounds in additional headroom for spending on long-term infrastructure projects.

- Richard Partington

The chancellor confirmed the decision while at the International Monetary Fund's annual meeting in Washington DC last week - aiming to soothe any jitters in the bond markets by announcing it in front of the global economic establishment.

The rationale for the budget sneak peek in Washington was clear. The IMF has become an advocate of governments borrowing for investment in recent years. It also backs debt rules that take into account not just the cost of borrowing but also the benefits.

However, the chancellor could have gone further on her tour to tee up Wednesday's tax and spending set piece - to New Zealand, where the government has focused on both its assets and liabilities for the past three decades.

Since the 1990s, New Zealand has included a target in its fiscal rules to ensure net worth remains at a level sufficient to act as a buffer to economic shocks. The measure takes into account liabilities, including government debt, but also assets including land, roads, railways, hospitals, schools, fire stations and military aircraft.

It's a measure Reeves has explored. However, a senior government source told the Guardian she has picked a narrower measure: public sector net financial liabilities (PSNFL), nicknamed "persnuffle". This accounts for financial assets, including student loans and company shares, but not physical ones.

Still, the chancellor could set a supplementary net worth target, with a view to focusing government attention on the benefits of investment. Treasury sources have said Reeves is keen to change the "culture" of the institution to do so.